Good day everyone and welcome to the Williams Partners LP First Quarter 2011 Earnings Release Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Sharna Reingold, Director of Investor Relations. Please go ahead, ma'am.

Sharna Reingold

Thank you, and good morning. Welcome to the Williams Partners first quarter 2011 earnings call. And as always, thank you for your interest in the company. As you know, we released our results yesterday after the market closed. Also yesterday, Alan had some commentary about our results. This audio commentary and slides are available on our website williamslp.com along with the press release, data book, analyst package and the podcast of Alan Armstrong's remarks yesterday. So, we will not be reviewing slides this morning.

In a minute, Alan Armstrong, our Chairman and CEO will make some brief remarks and we will open the lines for questions. Also be aware that Don Chappel, Rory Miller and Randy Barnard are available for any questions.

And before I turn it over to Alan for his remarks, please note that all the slides from yesterday are available on our website, williamslp.com. Please read slides two and three. Within the presentation and within our remarks today, there are forward-looking statements about future expectations and operations that are subject to various risks and uncertainties, which are disclosed on those slides.

Also included in today's remarks in the presentation are various non-GAAP numbers that have been reconciled back to measures included in Generally Accepted Accounting Principles. Those reconciliation schedules and related information are included in the slides available on our website, williamslp.com.

And with that, I'll turn it over to Alan.

Alan Armstrong

Great. Thank you, and appreciate you joining us this morning. First of all, I'm just going to give you a brief overview of some of the key points, and then we will, as Sharna said, turn it over to Q&A.

So first of all, in terms of our quarter results, solid quarter, but of course, we did have some impact from customers' production now just particularly in the Rockies that did lower our gathering and processing volume beyond the trend of growth that we're on, and we're happy to report that as we go into the second quarter here, well into the second quarter that volumes have rebounded nicely in those areas.

So overall though, a good solid quarter and certainly, we're excited that we were able to raise guidance for both '11 and '12 by 7% and 5% respectively. And so, lot of progress on the new projects front as well. First of all, our Gas Pipes Group placed on Transco, placed a couple of well executed projects in place that are going to be adding over $30 million of segment profit for the balance of the year. So, great work on the projects team there, and I'll speak to a little moment on the drivers and some of those continued expansions on gas pipes.

Secondly, in the Marcellus, we got some key infrastructure up and running late in the quarter. Our Shamrock compressor station, which is really a big cornerstone for our Laurel Mountain Midstream business and is really a key to continued volume growth there on the Laurel Mountain system and you can see some photographs out in the slides that we published yesterday, a large scale facility and starts to speak to our intent and plans to build that system out to 1.5 Bcf a day system and the team is well on our way to accomplishing that.

As well in the Marcellus, up in the Northeast Pennsylvania area, the Lathrop Compressor Station, which is part of the assets that we acquired from Cabot was expanded in the quarter and we now have all seven units up and running there. And that also is a key facility for that Cabot gathering system. And as well, we made great progress on getting the Springville lateral moved ahead and we expect that to be up in the third quarter of this year. So, a lot of exciting advances in those key areas in terms of building projects and continue to build out that business.

We also announced the Gulfstream drop-down, which will add to the balance of the year in terms of distributable cash flow for WPZ, and we are raising our 2012 CapEx guidance on the project that we're not ready to announce the details on, but we can tell you it's a GulfStar application in the deepwater Gulf of Mexico, and Rory may provide some comments on that in the Q&A, but exciting development has gone on there. And we're just unfortunately not positioned to disclose the producers that stand behind that project yet, but we look forward to doing that.

And in addition, we continue to expand our operations footprint. First of all in the Overland Pass Pipeline, we did transfer operations of that system this year. We're really excited about the exposure that Overland Pass Pipeline has to both the Niobrara Shale, both in kind of the better known part of the Niobrara Shale in the Colorado and Wyoming area, sorry, in the Eastern Colorado and Wyoming areas, but as well Niobrara extends into the Piceance as well. And we look forward to the kind of opportunities that that's going to bring to gathering, not only our gathering systems out there, but as well as Overland Pass Pipeline.

In addition to that we transferred the operations from the Cabot gathering system. Great effort on both Cabot's part of being well prepared for that transition and our own team's part of doing that in a seamless way, and we're very pleased with the relationship there and really excited about the kind of drilling performance that Cabot is experiencing up in the Susquehanna County area and excited to be a part of that growth up there and working with their good teams in that area.

On the financial performance front, we are raising the guidance on the higher NGL margins. Confidence in some of the projects like the Perdido Norte Project, which is beginning to ramp up its volumes and as I mentioned, Gas Pipes continues to add projects as well and the Marcellus growth that I spoke about.

So, a lot of confidence right now in our '11 and '12, but of course, some of that is buoyed by NGL margins. I will tell you that the NGL margins that we have in the forecast right now to midpoint are certainly well below what we're experiencing currently for NGL margins. But we know how quickly those can change as well. So, we're at a point we're comfortable with at this point in terms of our guidance.

As well that is, our coverage ratio was very high for the first quarter, and couple of things driving that, certainly the high margins, but also the spending on maintenance CapEx will start to ramp up as we move out of the winter weather that we were experiencing. But as I said earlier as well, the margins right now are higher than what we have in the plan as well. So, we're well positioned on that coverage ratio and feel very good about where we stand there.

Strategically, we're really excited to see in the Gas Pipes area, we've been talking about this for a while and you've heard industry talking about the amount of gas-fired power generation, exciting that the latest two projects that I mentioned on gas pipeline, which was the 85 North and the Mobile Bay expansion, both of those projects were driven by, it's about 600,000 dekatherms of additional firm capacity demand and both of those projects were completely driven by gas-fired power generation increases in the Southeast.

And so, we're staring to see that impact that we've been expecting with lower gas prices start to have utility stepping up and taking space on infrastructure that we think is going to be critical to the U.S. continuing to use abundant low price natural gas; so really excited to see that start to take fruition.

And then as well, the Marcellus and Niobrara shales, we continue to be very focused on being a major player in serving those areas, and then as I mentioned, the GulfStar Project. And we remain very bullish on the capabilities of deepwater, and particularly our ability to serve that area with infrastructure.

So, we're extremely well positioned within the guidance period and beyond the guidance period. And we are excited to see our CapEx on the growth side continuing to grow and we would expect that to continue as we continue to identify additional projects.

And with that, I will turn it over for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And we have a question from Ted Durbin from Goldman Sachs.

Ted Durbin – Goldman Sachs

Thanks. Just wondering, if you can talk a little bit more about the co-plant retirement opportunity, TVA announced they're going to retire, I think 2,700 megawatts of coal over the next four to five years. Where do you see the gas demand coming on to Transco over the next few years?

Randy Barnard

Well, thanks for the question, Ted. This is Randy Barnard. I actually think Alan was considering eliminating my position because Alan's gotten too many questions over the last conference calls.

I mean actually that's where we like it in the Gas Pipeline business. We like playing the role of steady earner and steady growth and cash generator. And the power generation opportunities for this sector really speak to that story.

Not just the Tennessee Valley Association activity, but there are a number of power producers out there that are projecting that they will be saddled with significant new regulations on their coal-fired generation that makes much more economic to switch to natural gas. There are quite a number of opportunities that we're examining, among them are which is the Tennessee Valley Authority.

There are at least expected in Florida, which should help our growth opportunities for our Gulfstream franchise. You mentioned the TVA, Virginia Power, Southern Company, Progress Energy, some activity in New Jersey. All those, as you can tell, would be surrounding our Transco and Gulfstream assets. But we're quite active and there's quite a bit of churn in this space and we're very optimistic that we're going to capture our share of those markets.

Ted Durbin – Goldman Sachs

Okay. Thanks. That's helpful. And can you go to a little bit on Keystone Connector, just an update on how you're seeing producer demand there? How you feel like your projects line up versus the competition and maybe just overall, what you're seeing in terms of drilling activity volumes in your Laurel Mountain area? Thanks.

Randy Barnard

Well, this is Randy Barnard. I can certainly tackle the front-end of that question. I would deem the Keystone Connector as a slowly developing project opportunity. Many of the potential customers, shippers for that project chopped down quite a bit of new commitment to firm capacity out of the region in the last year or so. And we keep checking up with them, and they need another month or two to really let things settle, the permitting issues in Marcellus and the pace at which they'll be able to develop will all, and in that capacity that they've committed to already, they've got to let the dust settle a little bit on that before they can commit to that next tranch.

There is going to be some more capacity built out of that area though. And our Keystone Connector project would be extraordinarily well situated to service the Southern and Pennsylvanian Marcellus, not to mention the blending opportunities to get ethane out of the region into that massive bottle we call Transco System. So, standby, we're continuing to develop the opportunities there and we're optimistic that we can bring a project to forefront.

Ted Durbin – Goldman Sachs

Okay. Great. Thanks. Appreciate, those are my questions.

Operator

(Operator Instructions) And at this time, we have no further questions in the queue. I'd like to turn the call back over to Alan Armstrong for any, I'm sorry, we did have someone just queued up, if you just don't mind taking that question. The question comes from Craig Shere from Tuohy Brothers.

Craig Shere – Tuohy Brothers

Hi, guys. I'm sorry about that, I thought I queued up early. Couple of quick follow-up questions, if you can de-risk some of the commodity exposures at PZ, given a lot of the accretive growth CapEx you've got going on, how do you think about the decisions of dramatically lowering the distribution coverage ratio, and then to a degree you need just issuing equity to raise what you need for the growth funding versus retaining a portion of the internal free cash flow once it's de-risked for those growth CapEx purposes?

Alan Armstrong

Craig, I would tell you that if you look for instance at our fee based processing volumes were up, I think around 19% for the quarter over the first quarter of last year. So, we are de-risking some of those contracts. We mentioned the Mobile Bay contract and that going from keep whole to percent-of-liquids, which certainly doesn't completely remove risk, but is at least less volatile.

So, we are moving in that direction, and your point is very well taken. The good news is we've got a lot of place to go with that cash right now that is into lower risk projects. And so, as we continue to do that, continue to invest in that, we are, in effect, de-risking our portfolio by investing in less commodity sensitive projects going forward.

So, just through that natural investment in those kind of projects versus commodity risk projects, we're moving to that but we do look at the value trade. I would tell you that trading that off without a value upgrade is pretty difficult. There is a lot of value. We feel very good about the fundamentals as we sit right now in the NGL margin space. And so, we're not all that interested in just giving that away. But we are looking for opportunities where we can to convert those into lower risk contracts.

But it's not going to be on a wholesale basis, when the destroy value. So, we're very conscious of the issue you raise. And the good news is, is we've got such a good place to go with that capital right now that we're putting it to work very quickly. And I think we'll continue to do that and invested projects to de-risk the portfolio.

Craig Shere – Tuohy Brothers

I guess I wasn't envisioning the question as an either/or of growth or distributions. I was thinking more on, is it reasonable that if you were able on a appropriately risked basis to jack up the distributions that in an ideal world, your unit values would respond and you might be able to issue public equity at a cheaper cost, and just went all the way around rather than retaining those cash flows because you have all these growth projects?

Alan Armstrong

Well, that's an option. But again, if margins were to fall rapidly in the face of that before that reinvested capital went to work. In your scenario, I assume you would issue new equity to build new projects or acquire something. And that's going to be pretty hard to compete with right now given kind of where the acquisition market is and the lack of immediate accretion from a project that we build. So, I think it's a pretty tough trade off as we look at that opportunity right now.

But we'll certainly continue to look at that. We'd certainly appreciate the value in driving that distribution up. But I'll remind you, we're up over 100% in distribution growth since August of '05. And I'm not sure that we got really good credit for the kind of fast pace that we increased our distributions. We really didn't trade that much better than our peers. And so, certainly amongst the major MLPs, we continue to be at a higher growth rate than the major than our big integrated peers.

And so, I think, we ought to be trading at more of a premium than we are. So, I'm not sure accelerating that dramatically that we would necessarily see our yield move the way it probably should. So, at least given the history, we really haven't seen recognition at least from my vantage point of how fast we've grown that distribution.

Craig Shere – Tuohy Brothers

Understood. And last question, I'm going to try to phrase this from a PZ perspective. On the MB call, there was kind of a mention that there was kind of an Option B where if no one else steps in, the MB Olefins unit can certainly contract long-term for ethane off-take from PZ. And to make that meaningful in terms of de-risking PZ, do you believe that that kind of contracting would require a major expansion of those operations that you already serve or would it somehow be a kind of industry setting contract term that would kind of get the ball rolling for what already exists between the sister businesses?

Alan Armstrong

Yeah. Well, you're right on top of the issue. I think, as we've said historically, a little over half of our ethane exposure right now is being consumed at Geismar. And we certainly have some expansion opportunities there that could consume a larger portion of that.

And then your point about, well, would it be a larger industry contract, we certainly, for that to clear muster, would certainly have to be done at market clearing levels. And so having a third party involved in that might help prove up the market on that.

So, those are kind of things that we would need to look at to make sure that from an accounting standpoint that it was perceived as being clearing with the market. And we certainly are looking at those opportunities pretty heavily, and comparing it to our alternatives. So, the good news is, we still remain optimistic about the needs in the third-party market. But the good news is, we certainly have the capability of executing on some of that ourselves.

And frankly, we're well positioned. We've got the pet-chem space, still don't have as low a cost of capital as we have in the MLP space. And our ability to kind of nudge up right against that and help those expansions is something that you'll continue to see us look at and including doing things like the ethane distribution system that is still within WMB. It's not in PZ today. That has quite a bit of room to continue to serve these expanding ethane markets with both its storage and distribution system. And so making investments in that is also an opportunity for PZ as well.

Craig Shere – Tuohy Brothers

Great. Thank you very much.

Operator

And our next question will come from Sharon Lui from Wells Fargo.

Sharon Lui – Wells Fargo

Alan, just a question in regards to, I guess, the sequential change in your NGL production and equity volume. The slide in the data book on page 24 gives a good depiction of, I guess, the volume variance. Is it reasonable to assume that next quarter, you should realize, I guess, an incremental 65 million gallons of NGL production, all else being equal?

Rory Miller

Yes, this is Rory. Well, I think, slide 27 kind of talks to why we were down in our overall production volumes, severe winter weather. We were hit particularly hard at Echo and in the Four Corners and to a lesser degree at Opal. We also had some significant maintenance going on at Opal. So, the total production volumes were down, of course, the equity volumes were down for those same reasons, plus a change in the contract mix that's been talked about already.

So, we do think that we'll be more at a full run rate for all of our facilities. In the second quarter, things are looking good so far. We're on a bit of a growth trajectory anyway in our total production, and we think we'll see the equity volumes come back up. And we're pretty confident so far about how the quarter is looking in the second quarter.

Sharon Lui – Wells Fargo

Okay. So, the maintenance volumes should come back, is that correct?

Rory Miller

Yes. That's correct.

Sharon Lui – Wells Fargo

Okay. And I guess turning to natural gas pipelines, it seems like I guess the FERC is scrutinizing the rate of returns a little bit more for the pipeline companies. Maybe if you could just talk about your ROEs for your two pipelines?

Randy Barnard

Well, this is Randy Barnard again. And the two pipelines to which you're referring, I assume, are Transco and Northwest Pipeline. Of course we do have 50% interest in Gulfstream as well. The returns are not published on either one of those wholly-owned pipelines that we had blackbox settlements with our customer groups, and the last rate case settlements, which were about almost five years ago, four years ago I believe.

Both of Northwest and Transco have required comebacks for rate case filings to be implemented by 1/1/13 on Northwest Pipeline and two months later on Transco. We actually are not one of those pipelines that can be accused of over recovering on its cost of service. When you refer to the FERC, I think you're referring to their Section 5 authority where they have forced some scrutiny on several of our competitors.

We have not had that same problem, do not anticipate that same problem, would expect that when we file our rate cases that it would provide, it would synchronize our cost of service to slightly higher plains and that is outside of our guidance period. So, you're not seeing that in '11 or '12. You will see that starting in 2013.

Sharon Lui – Wells Fargo

Okay. That's very helpful. Thank you.

Operator

And our next question will come from Andrew Gundlach from ASB.

Andrew Gundlach – ASB

Hi, good morning. Could you further address the volume issue and also the price of, on the Gulf Coast of ethane? Maybe just starting with the Gulf Coast, what drove ethane prices back to such a high level out of the Gulf Coast? Is that just the overall market or is there something else going on in the Gulf Coast reporting?

Rory Miller

Hi, this is Rory. In terms of ethane prices that we received in the Gulf Coast, I don't think our price situation was really any different than the market, as a whole. Demand is good. In fact as we've looked at hedging volumes this year, we looked out just the last few days, the rest of the year is really picking up. I think there's a general understanding that the pet-chem demand on ethane is going to support the current ethane supply or maybe even pull the price a little bit. So, the basic fundamentals are very sound right now on ethane, and that's obviously leading to good margins.

Andrew Gundlach – ASB

So, when you say Gulf Coast for your divisional process, does that include Markham or is that only Markham?

Rory Miller

Our Gulf Coast would include our Markham facility and our Mobile Bay facility. And then, we also have our Discovery facility. It's actually an equity investment. But I think in our pro-forma look in the data book, you can see all of the Gulf Coast volumes combined. So that would be from all three plants including our Larose plant at this part of our Discovery system.

Andrew Gundlach – ASB

No. I was only focused on the margin per gallon per ethane and heavies where I think you breakout Discovery separately. But in effect, so that's mostly keep-whole if I remember correctly. So, in effect what you're saying is the way things look today, that $0.42 margin per ethane gallon and $1.14 per heavy or NGLs margin per gallon. Those would appear sustainable based on the spot pricing today. Is that true?

Rory Miller

If you're looking at the overall NGL margins and how they're spiking up. We've had a lot of discussion already about a change in the contract at Mobile Bay that went from keep whole to percent-of-liquids. And even though the total volume goes down because the producers are supplying fuel shrink on that reduced volume, the unit margin goes up a lot. And in fact, I think the change on our total barrel in the ethane was, the total barrel margin was up about 14%.

Andrew Gundlach – ASB

Got you. Terrific, that's helpful. Thank you. And then, the other question is on the earlier question here that was asked on volumes out of the Rockies. I don't know, if you're still going to do this, but you used to breakout Wamsutter and Four Corners the merger of all the MLPs together. Is the Four Corners still a growth area or when you recover from your winter of lower throughput, do you expect to get above where you were this time last year, say?

Alan Armstrong

Yeah. I think that's a great question. I don't know that I've got a perfect answer for it. But the more traditional supply areas in the San Juan Basin are on a bit of a decline. They're not drawing a lot of drilling dollars there today. There are some new interesting plays that are developing there. Some shale plays that some people are looking at. So, we're optimistic that there may be another frontier out there, but it's probably a little bit early to call. But in general, I would say that the traditional plays there in the San Juan Basin are not drawing as many drilling rigs today as they were a couple of years ago. So, we're not seeing quite enough wells being drilled each year or forecasting that enough are going to be drilled to totally replace the coin.

Andrew Gundlach – ASB

I got you. I suppose you're hoping for the Luis or Mancos shale, is that right?

Alan Armstrong

Yes.

Andrew Gundlach – ASB

Yeah. Okay, great. Thanks so much.

Operator

And we have no further questions in the queue at this time. I'd like to turn the call back over to Alan Armstrong for any additional or closing remarks.

Alan Armstrong

Okay. Great. Well, thanks for the great questions and we were very excited about the balance of '11 and into '12 and particularly excited about the long-term viewpoint that we have at PZ right now, a lot of great options. When you get any questions about what you're going to do about all the excess cash you're generating, those are great problems to have and we're really excited about the number of places that we have to put that to work.

So, thank you again for your interest and we look forward to speaking with you next time.

Operator

That does conclude our conference for today. Thank you for your participation.

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